Cordillera Career Development College

College of Business administration and Accountancy

Buyagan, Poblacion, La Trinidad, Benguet

Important! This material shall be used in conjunction with MSPW - THEORIES and shall be deemed incomplete without
revisiting the following items:
Consider the trend on the nature of questions given in management Services for the past 3 years (2010 to 2012)
based on candidates’ feedbacks and comments obtained right after the CPA exam :
Average Allocation of the 70 MS Questions
63% PROBLEMS (44items)
37% THEORIES (26 items)

1. ABC Company believes that it can sell long-term bonds with 6% coupon, but a price that gives a yield-to-maturity
of 9%. If such bonds are part of next year’s financing plans, which of the following should be used for bonds in
their after ax (40 percent rate) cost-of-capital calculation?

a. 3.6% b. 5.4% c. 4.2% d. 6.0%

2. BCD Company sold 12 percent, non-convertible preferred stock with a par value of P 50. The stock sold for P 55,
and flotation costs were 6 percent of the market price. Tax rate is 30%. What is MUD’s cost of preferred stock
for cost of capital computation?

a. 11.6% b. 10.91% c. 8.12% d. 7.64%

3. A firm is expected to pay a dividend of P 5.00 per share this year. Dividend is expected to grow at a rate 6%.if the
current market price of the stock is P 60 per share, what is the estimated cost of equity?
4. CDE Company’s cost of equity is 18%, its before-tax cost of debt is 8 percent, and its corporate tax rate is 40
percent. Given the following balance sheet, calculate the after-tax weighted average cost of capital.

ASSETS LIABILITIES & EQUITY

Cash P 100 Accounts payable P 200
Accounts receivable 400 Accrued taxes due 200
Inventories 2,000 Long-term debt 400
Plant and equipment 1,300 Equity 1,200
P 2,000 P 2,000
a. 16.8% b. 14.7% c. 10.3% d. 9.7%

5. DEF Corporation carries no debt in its capital structure. Its beta is 0.8. The risk free rate is 9 percent and the
expected return on the market is 15 percent. The company has an opportunity to invest in a project that earns
12%. What is DOG’s cost of capital?

a. 4.8% b. 9% c. 12% d. 13.8%

6. EFG Company is considering the sale of a machine with a book value P 25,000 annually is available. The machine
has a current value of P 50,000. What is t5he cash flow from selling the machine if the tax rate is 40%?

a. P 25,000 b. P 50,000 c. P 62,000 d. P 80,000

7. FGH Company is considering replacing old equipment that has a net book value of P 100,000, remaining useful
life of 4 years with P 25,000 depreciation each year. The old equipment can be sold for P 80,000.The new
equipment cost P160, 000 and has a 4-year useful life. Cash savings on operating expenses before 40% taxes
amount to P 50,000 per year. What is the amount of investment in the new equipment?

a. P 160,000 b. P 80,000 c. P 72,000 d. P 68,000

Items 8 to 12 are based on the following information

A proposed investment is not expected to have any salvage value at the end of its 5-year life. For the present value
purposes, cash flows are assumed to occur at the end of each year. The company uses a 12% after-tax target rate of
return (cost of capital).
year Purchased cost and Annual net after-tax Annual net income
book value cash flows
0 P 500,000
 1 336,000 P 240,000 P 170,000
2 200,000 216,000 78,000
3 100,000 192,000 86,000
4 36,000 168,000 94,000
5 144,000 102,000

Discount Factors for a 12% rate of return

Year Present Value of P 1 Present value of an annuity of P 1
1 0.89 0.89
2 0.80 1.69
3 0.71 2.40
4 0.64 3.04
5 0.57 3.61

8. What is the traditional payback period?

a. Over 5 years c. 2.23 years

b. 2.83 years d. 1.65 years

9. What is the accounting rate of return based on average investment?

a. 12.0% b. 34.4% c. 40.8% d. 84.9%

10. What is the net present value?

a. P 500,000 b. P 212,320 c. P 191,920 d. (P145,680)

11. What is the profitability index?

a. 0.38 b. 1.38 c. 1.425 d. 1.66

12. Which statement about the internal rate of return (IRR) of the investment is true?

a. The IRR is exactly 12% d. No information about IRR can be

b. The IRR is over 12% determined
c. The IRR is under 12%

13. HIJ Company has P 5,000,000 of average inventory and sales of P 30,000,000. Using a 365-day year, calculate the
firm’s inventory conversion period.

a. 30.25 days b. 45.00 days c. 60.83days d. 72.44 days

14. A growing company is assessing current working capital requirements. An average of 58 days is required to
convert raw materials into finished goods to sell them. Then an average of 32 days is required to collect on
receivables. If the average time the company takes to pay for its raw materials were 15 days after they are
received, then how long in days would be total cash conversion cycle for this company?

a. 11 days b. 41 days c. 75 days d. 90 days

15. A firm has daily cash receipts of P 100,000. A bank has offered to reduce the collection time on the firm’s
deposits by two days for a monthly fee of P 500. If money market rate is expected to average 6% during the
year, what is the net annual benefit (loss) from having this service?

a. P 12,000 b. P 6,000 c. P 3,000 d. (P 3,000)

16. IJK Company’s budgeted sales for the coming year are P 40,500,000 of which, 80% are expected to be credit
sales at terms on n/30. IJK estimates that a proposed relaxation of credit standards would increase credit sales
by 20% and increase in the average collection period from 30 days to 40 days. Cost of money is 15%. Based on a
360-day year, how much opportunity cost is involved with the proposed relaxation credit standards?

a. P 243,000 b. P 540,000 c. P 900,000 d. P 1,620,000

17. JKL Motor Company uses 4,500 units of Parts S-10 each ear. The cost of placing one order for Part S-10 is
estimated to be about P 20. Other cost associated with carrying Part S-10 in inventory are :

Annual cost per part

Insurance P 0.20
Property taxes 0.09
Interest on funds invested 0.15
Others 0.06
Total costs P 0.50

Assume that the company has been able to reduce the cost of placing an order to only P 1.00. Also assume that
when the waste and inefficiency caused by inventories is considered, the cost to carry an inventory jumps to P
1.60 per unit. Under these conditions, what would be the Economic Order Quantity?

a. 75 b. 80 c. 95 d. 100

18. KLM Corporation’s economic order quantity (EOQ) for production raw material is 5,000 pounds. If the company
maintains a safety stock of 500 pounds and its order point is 1,500 pounds, what would be the total annual
carrying costs assuming that the carrying cost per unit is P0.20?

a. P 100 b. P 600 c. P 1,000 d. 1,100

19. If a firm purchases raw materials on a 2/10, net 60 cash discount basis, then what is the equivalent annual
interest rate of foregoing the cash discount and making payment on 60 th day?

a. 73.5% b. 14.7% c. 12.2% d. 2.0

20. If a firm borrows a P 500,000 at 10% and is required to maintain P 50,000 as a minimum compensating balance
at the bank, what is the effective interest rate on the loan?
a. 12.2% b. 11.1% c. 10% d. 9.1%
21. LMN Corporation is about to go public, it currently has after-tax earnings of P 7.5 million and 2.5 million shares
are owned by the present stockholders (the Presto Family). The new public issue will represent 600,000 new
shares. The new shares will be priced to the public at P 20 per shares, with a 5% spread on the offering price.
There will also be P 200,000 in out-of-pocket costs to the corporation. What rate of return must be earned on
the proceeds to the corporation so there will be no dilution in earnings per share during the year of going
public?
a. 15.08% b. 14.95% c. 16.90% d. 16.07%
22. MNO Company has P 3 million in total assets, P 1.65 million in equity, and a P 500,000 capital budget. To
maintain the same debt-equity ratio, how much debt should be incurred?
a. P 50,000 b. P 225,000 c. P 275,000 d. P 450,000
23. NOP Company has a price- earnings ratio of 7, earnings per share of P 4.40, and a payout ratio of 80%. What is
the dividend yield?
a. 80% b. 39.3% c. 11.4% d. 31.4%
24. A firm has a debt-equity ratio of 50 percent. Currently, it has interest expense of P 500,000 on P 5,000,000 of
total debt outstanding. Its tax rate is 40 percent. If the firm’s ROA is 6 percent, by how many percentage points
as the firm’s ROE greater than ROS?
a. 0.0% b. 3.0% c. 5.2% d. 7.4%
25. In OPQ Company, ‘Land’ decrease by P 70,000 because, of cash sale for P 70,000, ‘Equipment’ increased by P
35,000 because of cash purchase, and ‘Bonds Payable’ increased by P 100,000 from an issuance for cash at face
value. Sales remain constant during the period. What is the net cash provided by investing activities?
a. P 135,000 b. P 70,000 c. P 45,000 d. P 35,000
26. The following gross margin data were taken from the records of retailing firm PQR, Inc. for two periods:
2012 2013
Sales revenue P 192,500 P 210,210
Cost of sales (115,500) (165,400)
Gross margin P 77,000 P 44,810

If sales price decreased by 22% in 2013, what is the sales price variance?
a. P 59,290 F b. P 59,290 U c. P 77,000 F d. P 77,000 U
27. QRS manufactured he first batch of product in 10 hours. The second batch took an additional 6 hours. What
percent learning occurred?
a. 100% b. 90% c. 80% d. 60%
28. RST undergoing new products, A and B. the optimistic time to complete the project is 7 weeks. Most likely time
is 13 weeks, and pessimistic time is 16 weeks. Using PERT, how long is the expected duration for this activity?
29. STU produces two different products, A and B. The company has 100 pounds of raw materials and 300 direct
labor hours available for production. The time requirement and contribution margins per unit as follows:
A B
Raw materials per unit(lbs.) 1 2
Direct labor hours per unit 4 2
Contribution margin per unit P4 P5
What are the objective function for maximizing profits and equation for the constraint on raw materials?
Objective Function Constraint on raw materials
a. Max Z = 1 A + 2 B 4 A + 2 B ≤ 100
b. Max Z = 4 A + 5 B 1 A + 2 B ≤ 100
c. Max Z = 4 A + 2 B 4 A + 5 B ≤ 100
d. Min Z = 4 A + 5B 4 A +2 B ≤ 300

30. TUV is contemplating whether to investigate a labor efficiency variance in the assembly department. It will cost
P 6,000 to undertake the investigation and another P 18,000 to correct operations if the department is found to
be operating improperly. If the department is operating improperly and TUV fails to investigate, operating cost
from the various inefficiencies is expected to amount to P 33,000. TUV will be indifferent between investigating
and not investigating and not investigating the variance if the probability of improper operation is
a. 29% b. 40% c. 60% d. 71%
31. UVW Company System designs and develops specialized software for companies, and uses a normal costing
system. The following data are available for 2013: (Overhead is applied on the basis of direct labor hours)

Budgeted Actual
Overhead P 600,000 Units produced 100,000
Machine hours 24,000 Overhead P 603,500
Direct labor hours 75,00 Prime costs P 900,000
Machine Hour 25,050
Direct labor hours 75,700
What is the unit cost for the year?
a. P 15.00 b. P 15.03 c. P 15.06 d. P 15.09
32. VWX Company applies overhead at P 4 per machine hour. During March, it worked 10,000 hours and over
applied overhead by P 3,000. What was the actual overhead cost?
a. P 43,000 b. P 40,000 c. P 37,000 d. P 35,000
33. WXY Company is in the process of converting its traditional costing system to activity-based (ABC). Some of the
data gathered by the technical working group reveal the following:
Overhead Actual Budgeted Cost Annual Budgeted Activity Driver
Inspection costs P 600,000 2,000 inspection hours
Materials handling 1,200,000 400,000 kilograms
Set-up costs 800,000 40,000 set-up hours
The company shares the budgeted activity drivers and production data for its two products (D and E) as follows:
D E
Inspection hours 1,200 800
Materials weight 100,000 300,000
Set-up hours 25,000 15,000
Production in units 30,000 20,000
Machine hours 80,000 20,000
What would be the overhead rate per unit for product D using ABC as opposed to traditional costing?
a. P 12.00 b. P 14.50 c. P 38.67 d. P 52.00

Items 34 and 35 are based on the following information

XYZ Company has budgeted normal monthly capacity of 5,000 labor hours with a standard production of 4,000
units at this capacity. Standards costs are:

Materials 2 kilo at P 1.00 per kilo

Labor P 8.00 per hour
Factory overhead at normal capacity :
Fixed expenses P 5,000.000
Variable expenses P 1.50 per labor hour
During November, actual factory overhead totaled P 11,250 and 4, 500 labor hours cost P 33,750. Production
during the month was 3,500 units using 7,200 kilos of materials at cost of P 1.20 per kilo.
34. What was the material price variance?
a. P 1,440 U b. P 3,440 U c. P 204 F
 d. P 2,187.50
F
35. What was the labor efficiency variance?
a. P 2,250 U b. P 1,000 U c. P 2,187.50 F d. P 62.50 F
36. AAA Company uses a standard cost system. The following budget and the actual results are summarized :
Normal Capacity :
Direct labor hours (DLH) 24,000
Variable factory overhead P 48,000
Fixed factory overhead P 108,000
Total factory overhead per DLH P 6.50

Actual data for May were as follows:

Direct labor hours worked 22,000
Total factory overhead P 147,000
Standard DLH allowed for capacity attained 21,000
Using two-way analysis overhead variance, what is the controllable variance for May?
a. P 3,000 F b. P 3,000 U c. P 9,000 F d. P 9,000 U
37. BBB Company has a P 20,000 unfavorable fixed overhead budget variance, P 12,000 unfavorable variable
overhead spending variance, and a P 4,000 favorable volume variance. What was the total overhead?
a. P 28,000 over-applied c. P 36,000 over-applied
b. P 28,000 under-applied d. P 36,000 under-applied
38. CCC Company expects to incur the following costs at the planned production level of 10,000 units:
Direct materials P 100,000
Direct labor 120,000
Variable overhead 60,000
Fixed overhead 30,000
The selling price is P 50 per unit. The company currently operates at full capacity of units. Capacity can be
purchased to 13,000 units by operating overtime. Variable costs increase by P 14 per unit for overtime
production. Fixed overhead costs from a wholesaler who has offered buy 2,000 units at P 45 each. What is the
incremental cost associated with this special order?
a. P 84,000 b. P 62,000 c. P 42,000 d. P 31,000
39. DDD Company currently sells 10,000 units of product M for P 18.00 each. Variable costs are P 8.00 per unit. A
discount store has offered P 16.00 for 4,000 units of product M. the managers believe that if they accept the
special order; they will lose some sales at the regular price. Determine the number of units DDD could lose
before the order became unprofitable.
a. 2,000 units b. 2,667 units c. 3,200 units d. 5,000 units
40. EEE Company uses 8,000 units of a certain part in production each year. Presently, this part is purchased from an
outside supplier at P 12 per unit. For some time now, there has been idle capacity in the factory that could be
utilized to make this part. The following information has been assembled on the unit costs of making this part
internally :
Direct materials P 3.25
Direct labor 2.75
Variable manufacturing overhead 2.00
Fixed manufacturing overhead 5.00
The fixed manufacturing overhead listed above represents an allocation of existing costs to this part. However,
there would be an increase of P 12,000 in fixed manufacturing overhead cost for the salary of new supervisor.
Assume other things stay the same, at what price per unit from the outside supplier should EEE be indifferent
(on economic grounds) to buying or making the part?
a. P 8.00 b. P 8.50 c. P 9.00 d. P 9.50
41. FFF Co. plans to discontinue a division with a P 20,000 contribution margin. Overhead allocate to the division is P
50,000, of which P 5,000 cannot be eliminated. The effect of this discontinuance on FFF’s pretax income would
be an increase of
a. P 5,000 b. P 20,000 c. P 25,000 d. P 30,000
42. GGG Corporation employs 45 personnel to market its sedan cars. The average car sells for P 690,000 and a 6%
commission is paid to sales persons. It is considering changing the scheme to a commission arrangement that
would pay each person a package of P 30,000 plus a commission of 2% of sales made by the person. What is the
amount of total monthly car sales at which GGG Corporation would be indifferent as to which plan to select?
a. P 45 M b. P 36.5 M c. P 33.75 M d. P 22.5M
43. HHH Company has considerable excess manufacturing capacity. A special job order’s cost sheet includes the
following applied manufacturing overhead costs:
Fixed costs P 21,000
Variable costs 33,000
 The fixed costs include a normal P 3,700 allocation for in-house design costs, although no in-house design will be
done. Instead, the job will require the use of external designers costing P 7,750. What is the total amount be
included in the calculation to determine the minimum acceptable price for the job?
a. P 36,700 b. P 40,750 c. P 54,000 d. P 58,050
44. A Company’s independent manufacturing division sells 50,000 units to outsiders and transfers 3,000 units to
another division. The product has a perfectly competitive market price of P 7.00. Variable unit costs is P 4.00,
fixed costs are P 110,000, and manufacturing capacity is 44,000 units. What is the optimal transfer price for the
Company?
a. P 4.00 b. P 6.00 c. P 6.08 d. P 7.00
45. A mail-order confectioner sells fine candy in one-pound boxes. It has the capacity to produce 600,000 boxes
annually but forecasts that it will produce and sell only 500,000 boxes in the coming year. The costs to
manufacture and distribute the candy are detailed below. The organization has invested capital ofp6.75m.
Variable costs per pound
Manufacturing P 4.85
Packaging 0.35
Distribution 1.80
Total 7.00
Annual fixed cost
Manufacturing overhead P 810, 000
Marketing and distribution 270,000
What is the selling price per pound that the confectioner should charge for a one-pound box of candy to obtain a
20% rate of return on invested capital?
a. P 2.70 b. P 11.05 c. P 11.50 d. P 11.86
46. A company’s investment turnover is 1.4 and he return on invested capital is 35%. What is the profit margin?
a. P9.70 b. 35% c. 49% d. 87.5%
47. The following is available for III corporation for 2013:
Sales P2, 000,000
Average invested capital 500,000
What is the residual income for III Corporation?
a. P 0
b. P 200,000
c. P 210,000
d. P 246,000
48. The following information is available for JJJ Enterprises for 2013
Net operating profit after taxes P 36,000,000
Depreciation expenses 15,000,000
Change in net working capital 10,000,000
Capital expenditures 12,000,000
Invested capital (total assets-current liabilities) 100,000,000
Weighted average cost of capital 10%
What is the amount of the economic value added (EVS)?
a. P 36,000,000
b. P 26,000,000
c. P 20,000,000
d. P 15,000,000
49. KKK Company produces one product. A 10% wage increase goes into effect next year to the manufacturing
employees (variable labor). No other changes in cost are expected. Overhead will not change as a result of wage
increase. You are satisfied that volume is the primary factor affecting costs and have separated the semi-variable
costs into their fixed and variable components by means of least squares method.
You also observed that the beginning and ending inventories are never materially different. Below are current
year data assembled for your analysis:

Selling price per unit P 80.00

Annual volume of sales 5,000 units
Fixed costs P 51,000
Variable cost per unit:
Materials P 30.000
Labor 12.00
overhead 6.00
What increase in the selling price is necessary to cover the 10% wage increase and still maintain the current
contribution margin ratio?
a. P 0.75
b. P 1.00
c. P 1.50
 d. P 2.00

Items 50 and 51 are based on the following information:

An organization sells a single product for P 40 per unit, which it purchases for P 20. The salespeople receive a
salary plus a commission of 5% of sales. Last year the organization’s net income (after) taxes was P 100,800. The
organization is subject to an income tax rate of 30%. The fixed costs of the organization are

Advertising P 124,000
Rent 60,000
Salaries 180,000
Other fixed costs 32,000
Total P 392,000
50. What is the breakeven point in unit sales for the organization?
a. 8,800 units
b. 18,000 units
c. 19,800 units
d. 22,000 units
51. The organization is considering changing the composition plan for sales personnel. If the organization increases
the commission to 10% of sales and reduces salaries by P 8,000, what peso sales volume must the organization
have in order to earn the same net income as last year?
a. P 1,042,000
b. P 1,100,000
c. P 1,150,000
d. P 1,630,000
52. A company has sales of P 500,000, variable costs of P 300,000 and pretax profit of P 150,000. If the company
increased the sales price per unit by 10%, reduced fixed costs by 20%, and left variable cost per unit unchanged,
what would be the new breakeven point in sales pesos?
a. P 88,000
b. P 100,000
c. P 110,000
d. P 125,000
53. LLL Company has developed a new project that will be marketed for the first time during the next fiscal year.
Although Marketing Department estimates that 35,000 units could be sold at P 36 per unit. LLL’s management
has allocated only enough manufacturing capacity to produce a maximum of 25,000 units of new product
annually. The fixed costs associated with the new product are budgeted at P 450,000 for the year, which include
P 60,000 for depreciation on new manufacturing equipment. Data associated with each unit of product are
presented below. LLL is subject to 40% income tax rate.
Variable cost
Direct material P 7.00
Direct labor 3.50
Manufacturing overhead 4.00
Total variable manufacturing cost P 14.50
Selling expenses 1.50
Total variable cost P 16.00

LLL Company’s management has stipulated that it will not approve the continued manufacture of the new
product after the next fiscal year unless the after-tax profit is at least O 75,000 in the first year. What must be
the unit selling price to achieve this target profit?
a. P 37.00
b. P 36.00
c. P 34.60
d. P 39.00
54. Sales in MMM Company declined from P 100,000 to P 80,000, while income declined by 300%. Given these data,
what is the company’s operating leverage?
a. 2.7
b. 12
c. 15
d. 30
55. The method of least squares was used to develop a cost equation to predict the cost of purchasing goods. Eighty
points were used for the regression. The following output was received:
Intercept P 30,500
Slope 10
Coefficient of correlation 0.85
Standard error P 1,500
 The driver used was number of purchase orders. What is the cost of purchasing if 10,000 orders are processed?
a. P 129,500
b. P 130,500
c. P 135,000
d. P 132,000
56. Last year, MMM Company produced 10,000 units and sold 9,000 units. Fixed manufacturing overhead costs
were P 20,000, and variable manufacturing overhead costs were P 3 per unit . for the year, as opposed to the
net income under variable costing, one would expect net income under the absorption costing method to be
a. P 2,000 higher
b. P 5,000 higher
c. P 2,000 higher
d. P 5,000 higher
57. NNN Co. manufactures a single product. Unit variable production costs are P 20 and fixed production costs are P
150,000. NNN uses normal activity of 10,000 units. NNN began the year with no inventory, produced 11,000
units, and sold 10,500 units, how much is NNN’s ending inventory under absorption costing?
a. P 10,000
b. P 15,000
c. P 17,500
d. P 20,000
58. OOO has total budgeted fixed overhead costs of P 150,000. Actual production of 39,000 units resulted in a
favorable P 6,000 volume variance. What normal capacity was used to determine the fixed overhead rate?
a. 33,000
b. 37,500
c. 39,500
d. 40,500

Items 59 and 60 are based on the following information

The PPP Company prepared the following figures for its sole product as basis for its 2014 budget:
Expected sales 80,000 units
Estimated units sales price P 1.50
Required material per unit 1 kilo
Material inventory at beginning 10,000 kilos
Material inventory at end 12,000 kilos
Purchase price per kilo of materials P 0.20
Finished goods inventory - beginning 5,000 units
Finished goods inventory – end 6,000 units
Direct labor hour per 1,000 units 50
Direct labor hour per hour P8
Variable factory overhead per hour P6
Fixed factory overhead P 25,000
59. What is the budgeted peso amount of materials purchases for 2014?
a. P 18,600
b. P 16,600
c. P 16200
d. P 16,000
60. What is the total budgeted manufacturing costs for 2014?
a. P 72,900
b. P 81,700
c. P 97,000
d. P 97,900
61. Listed below are costs of quality that a manufacturing company has incurred throughout its operations. The
company plans to prepare a report that classifies these costs into the following four categories: preventive costs,
appraisal costs, internal-failure costs, and external costs.

Cost items Amount

A) Design reviews P 275,000
B) Finished goods returned due to failure 55,000
C) Freight on replacement finished goods 27,000
D) Labor inspection during manufacturing 75,000
E) Labor inspection of raw materials 32,000
F) Manufacturing product-testing labor 63,000
G) Manufacturing rework labor and overhead 150,000
H) Materials used in warranty repairs 68,000
 I) Process engineers 180,000
J) Product-liability claims 145,000
K) Product-testing equipment 35,000
L) Repairs to equipment maintenance 22,000
M) Scheduled equipment maintenance 90,000
N) Scrap material 125,000
O) Training of manufacturing workers 156,000
What would be the peso amount of the costs of quality classified as preventive costs for manufacturing firm?
a. P 643,000
b. P 701,000
c. P 736,000
d. P 768,000
62. PPP Manufacturing Corporation has the following information:
Moving time 8 days Processing time 10 days
Inspection time 2 days Waiting time 30 days
What is the manufacturing cycle efficiency (MCE)?
a. 20%
b. 25%
c. 60%
d. 80%
63. A time-and-motion study revealed that it should take 1 hour to produce a product that currently takes 3 hours
to produce. Labor is P 8 per hour. How much are the non-value added costs?
a. P 0
b. P 8
c. P 16
d. P 24
64. Given the following data, what is the marginal propensity to consume?
Disposable income Consumption
P 40,000 P 38,000
P 48,000 P 44,000
a. 1.33
b. 1.26
c. 0.95
d. 0.75
65. An individual receives an income of P 3,000 per month and spends P 2,500. An increase in income of P 500 per
month occurs, an individual spends P 2,800. What is the marginal propensity to save (MPS)?
a. 0.2
b. 0.4
c. 0.6
d. 0.8
66. QQQ has raised greens fees for a nine-hole game due to an increase in demand:
Games played
Old rate New rate (based on old rate) (Based on new rate)
Regular weekday P 10 P 11 80 70
Senior citizen 6 8 150 82
weekend 15 20 221 223

Which of the following is correct?

a. The regular weekday and weekend demand is inelastic
b. The regular weekday and weekend demand is elastic
c. The senior citizen demand is elastic and weekend demand is elastic
d. The regular weekday demand is inelastic and weekend demand is elastic

Items 67 to 69 are based on the following information:

Number of workers Total product units Average selling price

10 20 P 50.00
11 25 49.00
12 28 47.50

67. What is the marginal physical product when one worker is added to a team of 10 workers?
68. What is the marginal revenue product when one worker is added to a team of 11 workers?
69. What is the marginal revenue per unit when one worker is added to a team of 11 workers?
70. The financial transactions for a country with values stated in billions of pesos:
Gross Domestic Product (GDP) P 4,000
Transfer payments 500
Corporate income taxes 50
Social Security contribution 200
Indirect business taxes 210
Personal taxes 250
Undistributed corporate profits 25
Depreciation 500
Net income earned abroad for the country 0

A) Determine the net domestic product.

B) Determine the national income.

C) Determine the personal income.

D) Determine the disposable income.